Retirement is a “place” where we are all heading eventually. It depends on what road you want to tread while on this journey. The truth is, it’s never too early to start preparing for your retirement. It’s never too early to have retirement goals in mind. Let’s start with annuities. Annuities are in fact, retirements products that will give add overall value to your retirement portfolio. A fixed index annuity is one type that’s commonly used in retirement. Find out how it works.
What is a Fixed Index Annuity?
Just like any other type of annuity, a fixed index annuity is actually a contract of agreement between you and your insurance company where some kind of payment is being guaranteed. It is also known as an equity index annuity. A fixed index annuity is a cross between the variable annuity and the standard fixed annuity. Most of the time, people get confused due to the complexities of this type of annuity.
Characteristics of Fixed Index Annuity
A fixed index annuity has both the characteristics of a variable and fixed annuity. The return on your investment actually diverges more than a fixed annuity does but it won’t be as varied as that of a variable annuity. When talking about risks, a fixed index annuity is more risky than the fixed annuity though it will potentially provide you with a higher return. As compared to a variable annuity, it is in fact, less risky but of course, with a lesser return on your investment.
This form of annuity also offers a minimum interest rate as guarantee when you combine it with a particular interest rate in a market index. Since the interest rate is guaranteed, a fixed index annuity will have a potentially lesser risk in the market as compared to a variable annuity. It also boasts of a relatively larger return value than your traditionally fixed annuity, especially when the stock market is on the rise. Hibenjamin will tell you how.
Amounts Involved in Fixed Index Annuity
If you’re seriously considering an investment on fixed index annuity, go on by all means. The fact is, you don’t need to start big. Just like any contract, you can start with at least $5,000 as your minimum investment. You can always seek the advice of a financial professional to help you out in this area.
It’s not really as complicated as you believe it is but it’s always better if you have good knowledge. Ask questions so you can get the full benefits of a fixed index annuity. The tax benefits of a fixed index annuity are also incredible. In fact, you won’t be paying any tax until you made your withdrawal. You also need to understand that the fixed index annuity is regulated by the state just like any other investment portfolio in the market.
When planning for your investment, there are several things to consider. The most important thing is that you start thinking about it now.